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No, you aren't getting taxed twice.

Why they say to keep track of reinvested monies is that these funds get added on to the original cost basis of your shares. (The higher the cost basis is, the smaller the distance between that and the sale price--assuming you sell for a profit--and the smaller this amount is, the lower your tax will be.)

The only complication that I can see in all this is that some of your reinvestments will probably have been made within one year and thus the sale of the shares bought with them will generate short term capital gains; the bulk of the shares that are sold will generate long term capital gains. If Vanguard keeps track of this for you, I think you're home free. (In any case, this is something that is important from a tax point of view.)
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